Why tailor an Enterprise Agreement when I can get an Industry Agreement for $500?

Posted on: 24 Oct, 2012 |
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Enterprise Agreements

An Enterprise Agreement (EA) is a legally
binding document with serious consequences for an employer who
fails to comply with it (whether deliberately or not). Employers
must be very cautious about just accepting terms that a union or
group of employees wants in an agreement. If the clause is not
viable or sustainable from either a productivity or financial
perspective, employers must stand firm. Having a clause that does
not work for your organisation will not only cost your business
money during the life of the agreement, but could also continue to
haunt you for some time to come. Clauses in your EA can create an
industrial precedent that can be difficult and in some cases
(depending on your industry) impossible to remove.

Be careful

Cornwalls has recently been involved in helping a client resolve
an issue where the short term gain in having a 'cheap
agreement' did not pay off in the long term. This client had
an industry standard EA that included contributions to a redundancy
and portable long service leave scheme. The EA had a clause that
required the contributions to be made to a particular division of
the redundancy fund. That division covered an industry in which the
employer was not operating and the rates for that division were
significantly higher than the rates for other divisions of the same
fund. The weekly payments made for accruals of severance pay and
sick leave were four times higher than the accruals required to be
made under the National Employment Standards (NES)
and underlying Award. The 'overpayments' (in terms of the
NES requirements) made by the employer in respect of its employees
amounted to hundreds of thousands of dollars. The employer had no
option but to continue to make the payments because it was legally
required to pay to the fund due to the provision in the EA.

Seek advice

The employer in this case believed it was only paying the NES
requirements. No one had ever explained the effect of the clause in
the EA or that the payments to the fund were considerably in excess
of the NES requirements. There are limited prospects of
removing this clause in future EAs and it would have been better to
refuse to include the provision at the outset or, if that was not
possible, to renegotiate the amounts payable or the fund to which
the payments were made. The employer was effectively deprived of
this decision-making process because it was not advised of the
issue at the time. While the employer had saved $3,500 to $4,500 on
the drafting of the EA, clauses in that agreement had amounted to
additional payments of hundreds of thousands of dollars. There is
no doubt that the employer saved itself money and hassle during the
agreement-making process, but at the same time unnecessarily
incurred a very significant liability that will continue into the
future.

Comment

Each workplace has its own operational requirements; two
businesses in the same industry do not operate in the same way.
These differences need to be reflected in your EA. Your EA is a
legally binding document and you need to understand the legal
effect of all clauses and whether any clause will create an
unworkable industrial precedent for the future. This advice needs
to be informed by an up to date knowledge of the constantly
evolving law in this area and the bargaining process. At Cornwalls,
we have a team of lawyers experienced in providing this advice and
partnering with employers during the bargaining process.